Reshaping of 401(k)s

For most of the past few decades, retirement investors had a pretty narrow toolbelt to

choose from within their employer 401(k), 403(b), or TSP accounts: stocks, bonds, and

maybe a target date fund that mixed the two in different proportions. If you wanted

access to hedge funds, private credit, or private equity, you had to be running a pension

plan or sitting on the ultra-high-net-worth side of the fence. Everyday retirement savers?

No way Jose! That may be about to change.

On August 7, 2025, President Trump signed an executive order called “Democratizing

Access to Alternative Assets for 401(k) Investors.” In plain English, Washington is

pushing regulators to rethink how alternatives fit into retirement plans. The Department

of Labor has six months (until February 2026) to deliver updated rules, and their first

step was to scrap a 2021 statement that had essentially warned fiduciaries away from

alternatives. At the same time, the SEC is reevaluating its definition of who counts as a

“qualified” investor, meaning the guardrails that have kept average workers away from

private markets could soon loosen and be open to everyone.

If this plays out, we may start to see 401(k)’s including exposure to hedge funds, private

equity, private credit, and maybe even crypto. This would not be in a do it yourself

format, but packaged inside things like target date funds, interval funds, or collective

trusts. It won’t happen overnight. Even after new rules are finalized, plan providers will

take time to design, approve, and roll out these strategies. And because this is an

executive order (not an act of Congress), the whole process may still be tested in the

courts.

Still, the potential shift is worth paying attention to.

For asset managers, the attraction is obvious, 401(k) plans represent $12 trillion in

stable, long term capital. Even a sliver redirected into alternatives could reshape their

business models. But success will require more than clever products. It will demand

stronger oversight, investor education, and infrastructure built for retail investors.

For retirement savers, the story is about opportunity and caution in equal measure.

Alternatives can bring new tools to the table diversifying beyond the old stock and bond

mix, offering different income streams, and potentially boosting returns. But they also

come with new layers of complexity: less liquidity, less transparency, and widely varying

manager quality and fees.

And here’s where private equity, in particular, gets tricky. Historically, these deals have

been reserved for the wealthiest and most sophisticated investors, the kind of people or

institutions who have the staff, resources, and experience to sift through what’s

worthwhile and what’s not. But even among those investors, plenty of deals get passed

on because they don’t look compelling enough. The concern is that if those same deals

then get “repackaged” into a 401(k) option, less sophisticated investors may end up

owning the leftovers, the private equity opportunities that the big players didn’t want.

That doesn’t mean every deal is bad, but it does raise the question: are retirement

savers getting true opportunity, or simply access to the scraps?

In other words, these tools are powerful but they require careful use, ideally with

guidance from a professional who can help weigh the risks against the potential

rewards.

Bottom line, a door that’s been closed to most retirement savers for decades may soon

crack open. Whether it leads to better outcomes or new headaches will depend on how

carefully both investors and providers step through it.

The opinions voiced in this material are for general information only and are not

intended to provide specific advice or recommendations for any individual or firm.